“No Guts, No Sense, No Vision”


These are not my words, but the description of the Fed and its boss, by the US president

after the FOMC lowered the Fed Funds by 0.25% yesterday evening. Whilst that outcome

was entirely expected by the markets, it clearly wasn’t a big enough reduction for Trump. As

we know, and as I have mentioned many times previously, Trump wants the dollar lower

and stock markets higher, both of which are two core elements of his economic plan- if you

could call it that!


Now of course, this is largely political too, not just for his campaign chances in 2020, but in

respect of the dollar, Trump believes a lower buck is the main route to defeating China (and

anyone else for that matter) on trade. The fact that the dollar brushed off the rate cut

yesterday is as much about the chances of another move this year as anything else; chances

which according to the latest Fed ‘dot plot’ plan would appear to have been reduced.


The dollar will reverse at some point in the future, but only when the time is right for it to

do so and not before. Trying to ‘jawbone’ it lower to solve a trade imbalance at the same

time as increasingly forcing the Fed into a highly politicized position is nothing short of

draconian quite honestly, but hey; you get what you vote for I guess! Or do you? A very

pertinent question that leads me onto looking at the UK and the pound.


So, the ‘old lady’ is poised to do absolutely nothing this morning. Given the current situation

they have little choice really and the lower inflation readings yesterday only serve to

endorse that. Meantime, the pound has continued to outperform with the GBPEUR lifting

above its 200 daily moving average, which stood at 1.1312, to as high as 1.1338 yesterday.

To better see how this one has recovered from its August 1.0724 low please take a look at

an updated chart of that below where you can see the next rebound target of note looks to

reside at 1.1391.



Since my last update, the GBPUSD has posted an interim double top, after it peaked again

just above 1.2520 on Tuesday. The price shied off that last night as another rebound stalled

at 1.2512 before slipping back into the US close, where it ended at 1.2472. Perhaps if the

price can lift above 1.2530, then it might open up a further move towards the next major

resistance level at 1.2670- a 50% retracement of the 1.3381-1.1959 move this year.

However, in terms of the immediate future, much will depend of course on what emerges

from the Supreme court judgement and the Bank of England today. If the court ruling goes

against the PM, then it could the catalyst to deliver such a move, but we shall just have to

see on that.


Elsewhere the NOK has fared better since I last wrote about it and the EURNOK is back

below 10, currently trading around 9.88 ahead of the Norges Bank policy decision this

morning at 9am. The expectation is that the central bank will keep its benchmark rate

unchanged at 1.25%, but there are many who think otherwise, looking for another 0.25%


increase. I have no view on that particular issue, but I still prefer the NOK over the EUR no

matter what happens today, in keeping with what I said previously about that.

Finally, a word about gold this morning. The price did trade to as low as $1483.50 yesterday

evening following the ‘hawkish’ Fed rate cut, but somehow resisted a breakdown through

that $1480 level. The more this level holds the more potentially important it becomes and

whilst the price of gold in USD holds up that does continue to make it an attractive store of

value in other currencies where the cost of carry is far less.


The one in particular that I have been focusing on here; the price of gold in GBP, has come

back quite a way from the highs above £1,280 and is now certainly more attractive. Indeed,

as I advocated some weeks back, taking some profits on that, I do however still see upside

here in the medium to long term, but remembering that trade is as much about the GBPUSD

as it is about the metal itself of course. Perhaps if that falls further towards £1150 then I

might be tempted again- I will keep you posted on that.


Important Economic Releases/Events Due Today and Tomorrow

19/09- 8.30am Switzerland- SNB Policy Decision

(Consensus- Benchmark Rate Unchanged at minus 0.75%)

19/09-9.00am Norway- Norges Bank Policy Decision

(Consensus- Benchmark Rate Unchanged at 1.25%)

19/09- 9.30am UK August Retail Sales

19/09- 12.00pm Bank of England Monetary Policy Decision

(Consensus 0.75% Base Rate Unchanged)

20/09- 12.30am Japan August National CPI Inflation Report

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